Banks should look at quality of data they are provided: RBI

Banks should address the quality of the data they get as this is key to a sustainable growth. They should also look at the MSME sector for growth, according to a Reserve Bank of India official.

In his keynote address at the Credit Information Bureau (India) Ltd (CIBIL) seminar on Increasing Credit Penetration and Improved Asset Quality’, N S Vishwanathan, regional director, RBI, said when it comes to credit, information on the borrower is the key which could also help reduce the cost. The quality of information is key in the retail segment which is growing fast.

“Data quality is the major issue while we see the quantity, depth, and coverage of data increasing,” said Vishwanathan. “What you give you get, and the information you give will help in quality lending,” he told bankers at the conference.

He noted that there are examples of banks having given loans to companies which have fabricated their balancesheet.

On the sustainable growth, he said, the MSME segment should be a thrust area for growth and for financial inclusion. He added that credit penetration for the segment is only 7 per cent while the rest still depend on the unorganised sector.

To address this segment, a solid database is required. In Tamil Nadu, the regulator is talking to various MSME associations to find out how many members of these associations have availed of banking credit.

The banks have always seen this segment as being a risky one. For instance, when an SME account gets into trouble, banks look to only recovering it, but not reviving it, he said.

One of the issues that needs to be addressed is pricing for which credit rating is critical and credit system needs to be acceptable, which is not there now.

“In a nutshell, the quality of information system will lead to good quality of asset,” said Vishwanathan.

Earlier, M V Nair, Chairman, CIBIL, said that credit report market is growing. In 2004, only 13 million consumer records were available with CIBIL which has now increased to 200 million with 10 million companies’ records.